Lord Keynes — Wicksell’s Natural Rate and Homogenous Capital

It well known that Wicksell’s unique “natural rate of interest” was taken over by Mises and Hayek in their early formulations of the Austrian business cycle theory. In essence, the classic Austrian business cycle theory borrowed the “real” natural rate idea from Wicksell that required an assumption of homogeneous capital: something that modern Austrians are at pains to deny, since they accept (as Post Keynesians do) that capital is heterogeneous.

This is serious problem for Austrians. Austrians use a concept – the Wicksellian natural rate of interest – that is incompatible with their heterogeneous capital theory.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Wicksell’s Natural Rate and Homogenous Capital
Lord Keynes